25 Mar 2014

Diminished Organic Lead Volume Hurting Sales, Profitability

March 2014
Our analysis indicated both VistaPrint(VPRT) and BlueNile(NILE) relied heavily on consumers querying google for their products in highly competitive marketplaces with minimal product differentiation. For VistaPrint(VPRT), significant portion of their leads are generated by queries relating to business cards and for this term Vistaprint.com ranks #1. As a result of at least a decade of SEO VPRT was acquiring quality leads at no marginal cost. However, due to recent Google changes, more images ads from 4-8 vendors are now being shown at the top of search results, above VPRT’s organic listing. Our traffic and bid analysis indicated these leads are now going to a variety of vendors, not vistaprint.com. We projected a significant revenue shortfall as well as poorer profitability moving forward as VPRT would have to compete in an auction for the leads. Our projection proved accurate as VPRT missed its prior target for growth and once again said it was going back tot he drawing board.

Similar dynamics were at play for NILE, as bluenile.com ranked #1 for “engagement rings” an extremely lucrative keyword both in terms of heavy search volume, and value. Advertisers would pay up to $10 per click for this term NILE was getting for free. Again, as Google began to display images advertisements from a variety of bidders above their organic results, economics suffered. We noticed both lead quality and volume declining over the critical holiday period. Given its entirely online nature, our composite has a very high fit for near term revenues. As anticipated, NILE missed its prior projection and reduced its growth target for 2014.

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